Wrap Text
Old Mutual plc Preliminary Results for the year ended 31 December 2013 - Part 2
Old Mutual
ISIN CODE: GB00B77J0862
JSE SHARE CODE: OML
NSX SHARE CODE: OLM
ISSURE CODE: OLOML
Part 4 – Financial information
Index to the financial information
For the year ended 31 December 2013
Consolidated income statement 53
Consolidated statement of comprehensive income 54
Reconciliation of adjusted operating profit to profit after tax 55
Consolidated statement of financial position 56
Condensed consolidated statement of cash flows 57
Consolidated statement of changes in equity 58
Notes to the consolidated financial statements
A: Significant accounting policies 62
B: Segment information 66
C: Other key performance information 76
D: Other income statement notes 82
E: Financial assets and liabilities 84
F: Other statement of financial position notes 87
G: Other notes 88
H: Discontinued operations and disposal groups held for sale 90
I: Changes in accounting policies 91
Adjusted Group MCEV by line of business 94
Adjusted operating group MCEV statement of earnings 95
Adjusted operating Group MCEV earnings per share 96
Group MCEV statement of earnings 97
Notes to the MCEV basis supplementary information 98
A: MCEV policies 98
B: Segment information 107
C: Other supporting information 114
D: Sensitivity tests 117
Statement of directors' responsibilities
in respect of the preliminary announcement of the Annual Report and the financial statements
The directors confirm that to the best of their knowledge:
- The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
- The Annual Report includes a fair review of the development and performance of the business and the position of Old Mutual plc and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Julian Roberts Philip Broadley
Group Chief Executive Group Finance Director
28 February 2014
Consolidated income statement
For the year ended 31 December 2013
GBPm
Year ended
Year ended 31 December
31 December 2012
Notes 2013 Restated(1)
Revenue
Gross earned premiums B2 3,701 3,725
Outward reinsurance (317) (322)
Net earned premiums 3,384 3,403
Investment return (non-banking) 9,986 9,880
Banking interest and similar income 3,050 3,431
Banking trading, investment and similar income 195 214
Fee and commission income, and income from service activities 3,095 3,039
Other income 100 125
Total revenue 19,810 20,092
Expenses
Claims and benefits (including change in insurance contract provisions) (5,410) (5,612)
Reinsurance recoveries 246 221
Net claims and benefits incurred (5,164) (5,391)
Change in investment contract liabilities (5,873) (5,361)
Losses on loans and advances (368) (400)
Finance costs (81) (214)
Banking interest payable and similar expenses (1,616) (1,887)
Fee and commission expenses, and other acquisition costs (976) (1,064)
Change in third-party interest in consolidated funds (564) (651)
Other operating and administrative expenses (3,653) (3,715)
Total expenses (18,295) (18,683)
Share of associated undertakings' and joint ventures' profit after tax 21 32
Loss on disposal of subsidiaries, associated undertakings and strategic investments C1(c) (4) (56)
Profit before tax 1,532 1,385
Income tax expense D1 (552) (471)
Profit from continuing operations after tax 980 914
Discontinued operations
Profit from discontinued operations after tax H1(a) 3 564
Profit after tax for the financial year 983 1,478
Attributable to
Equity holders of the parent 705 1,172
Non-controlling interests
Ordinary shares F1(a) 259 256
Preferred securities F1(a) 19 50
Profit after tax for the financial year 983 1,478
Earnings per share
Basic earnings per share based on profit from continuing operations (pence) 14.9 12.6
Basic earnings per share based on profit from discontinued operations (pence) 0.1 12.3
Basic earnings per ordinary share (pence) C2(a) 15.0 24.9
Diluted basic earnings per share based on profit from continuing operations (pence) 13.8 11.6
Diluted basic earnings per share based on profit from discontinued operations (pence) 0.1 11.5
Diluted basic earnings per ordinary share (pence) C2(b) 13.9 23.1
Weighted average number of ordinary shares (millions) C2(a) 4,442 4,587
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details
Consolidated statement of comprehensive income
For the year ended 31 December 2013
GBPm
Year ended
Year ended 31 December
31 December 2012
Notes 2013 Restated(1)
Profit after tax for the financial year 983 1,478
Other comprehensive income for the financial year
Items that will not be reclassified subsequently to profit or loss
Fair value gains
Property revaluation 23 20
Measurement gains on defined benefit plans 70 8
Income tax on items that will not be reclassified subsequently to profit or loss D1(c) (12) 6
81 34
Items that may be reclassified subsequently to profit or loss
Fair value gains
Net investment hedge 43 160
Available-for-sale investments
Fair value (losses)/gains (5) 30
Recycled to profit or loss (9) (21)
Shadow accounting - 6
Currency translation differences on translating foreign operations (1,257) (641)
Other movements 9 (22)
Income tax on items that may be reclassified subsequently to profit or loss D1(c) 2 (5)
(1,217) (493)
Total other comprehensive income for the financial year from continuing operations (1,136) (459)
Total other comprehensive income for the financial year from discontinued operations(2) H1(b) - (348)
Total other comprehensive income for the financial year (1,136) (807)
Total comprehensive income for the financial year (153) 671
Attributable to
Equity holders of the parent (96) 503
Non-controlling interests
Ordinary shares (76) 118
Preferred securities 19 50
Total comprehensive income for the financial year (153) 671
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
(2) Total other comprehensive income from discontinued operations for the year ended 31 December 2012 includes GBP350 million cumulative foreign exchange
translation gains, previously included in foreign currency translation reserves that was realised on the disposal of Nordic.
Reconciliation of adjusted operating profit to profit after tax
For the year ended 31 December 2013
GBPm
Year ended
Year ended 31 December
31 December 2012
Notes 2013 Restated(1)
Core operations
Emerging Markets B3 590 611
Old Mutual Wealth B3 217 195
Property & Casualty B3 4 37
Nedbank B3 797 825
USAM B3 111 91
1,719 1,759
Finance costs B3 (92) (130)
Long-term investment return on excess assets 43 54
Net interest payable to non-core operations (11) (18)
Corporate costs (54) (54)
Other net income 7 1
Adjusted operating profit before tax 1,612 1,612
Adjusting items C1(a) (286) (467)
Non-core operations B3 32 165
Profit before tax (net of policyholder tax) 1,358 1,310
Income tax attributable to policyholder returns D1(d) 174 75
Profit before tax 1,532 1,385
Total tax expense D1(a) (552) (471)
Profit from continuing operations after tax 980 914
Profit from discontinued operations after tax H1(a) 3 564
Profit after tax for the financial year 983 1,478
Adjusted operating profit after tax attributable to ordinary equity holders of the parent
GBPm
Year ended
Year ended 31 December
31 December 2012
Notes 2013 Restated(1)
Adjusted operating profit before tax B3 1,612 1,612
Tax on adjusted operating profit D1(d) (424) (440)
Adjusted operating profit after tax 1,188 1,172
Non-controlling interests – ordinary shares F1(a) (279) (281)
Non-controlling interests – preferred securities F1(a) (19) (50)
Adjusted operating profit after tax attributable to ordinary equity holders of the parent B3 890 841
Adjusted weighted average number of shares (millions) C2(c) 4,836 4,818
Adjusted operating earnings per share (pence) C2(c) 18.4 17.5
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
Basis of preparation of adjusted operating profit
Adjusted operating profit (AOP) reflects the directors' view of the underlying long-term performance of the Group. AOP is a measure of profitability
which adjusts the standard IFRS profit measures for the specific items detailed in note C1 and, as such, it is a non-GAAP measure. This
reconciliation explains the differences between adjusted operating profit and profit after tax as reported under IFRS.
For core life assurance and property & casualty businesses, AOP is based on a long-term investment return, including returns on investments held
by life funds in Group equity and debt instruments, and is stated net of income tax attributable to policyholder returns. For all core businesses, AOP
excludes goodwill impairment, the impact of acquisition accounting intangibles and costs related to successful acquisitions, revaluations of put
options related to long-term incentive schemes, profit/(loss) on acquisition/disposal of subsidiaries, associated undertakings and strategic
investments, fair value profits/(losses) on certain Group debt movements and costs related to the fundamental restructuring of continuing
businesses. AOP includes dividends declared to holders of perpetual preferred callable securities. Old Mutual Bermuda and Nordic are treated as
non-core operations in the AOP disclosure, as such they are not included in AOP. Refer to note B1 for further information on the basis of
segmentation.
Adjusted operating earnings per share is calculated on the same basis as AOP. It is stated after tax attributable to AOP and non-controlling
interests. It excludes income attributable to Black Economic Empowerment trusts of listed subsidiaries. The calculation of the adjusted weighted
average number of shares includes own shares held in policyholders' funds and Black Economic Empowerment trusts.
Consolidated statement of financial position
At 31 December 2013
GBPm
At
At 31 December
31 December 2012
Notes 2013 Restated(1)
Assets
Goodwill and other intangible assets 2,835 3,056
Mandatory reserve deposits with central banks 759 921
Property, plant and equipment 722 847
Investment property 1,811 1,947
Deferred tax assets 303 345
Investments in associated undertakings and joint ventures 168 152
Deferred acquisition costs 1,211 1,288
Reinsurers' share of policyholder liabilities 1,875 1,406
Loans and advances 33,386 38,495
Investments and securities 88,417 88,513
Current tax receivable 128 103
Trade, other receivables and other assets 2,583 3,006
Derivative financial instruments 1,259 1,780
Cash and cash equivalents 4,869 5,061
Non-current assets held for sale 5 42
Total assets 140,331 146,962
Liabilities
Long-term business policyholder liabilities 81,141 80,188
General insurance liabilities 332 346
Third-party interests in consolidated funds 5,478 6,116
Borrowed funds E1 2,629 3,050
Provisions and accruals 236 265
Deferred revenue 628 689
Deferred tax liabilities 491 404
Current tax payable 237 287
Trade, other payables and other liabilities 4,274 4,940
Amounts owed to bank depositors 34,370 39,499
Derivative financial instruments 1,478 1,402
Non-current liabilities held for sale - 3
Total liabilities 131,294 137,189
Net assets 9,037 9,773
Shareholders' equity
Equity attributable to equity holders of the parent 7,270 7,816
Non-controlling interests
Ordinary shares F1(b) 1,502 1,684
Preferred securities F1(b) 265 273
Total non-controlling interests 1,767 1,957
Total equity 9,037 9,773
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
Consolidated statement of cash flows
For the year ended 31 December 2013
GBPm
Year ended
Year ended 31 December
31 December 2012
2013 Restated(1)
Cash flows from operating activities
Profit before tax 1,532 1,385
Non-cash movements in profit before tax 1,423 249
Changes in working capital 447 1,039
Taxation paid (458) (295)
Net cash inflow from operating activities 2,944 2,378
Cash flows from investing activities
Net acquisitions of investments and securities (1,658) (1,449)
Acquisition of investment properties (47) (55)
Proceeds from disposal of investment properties 22 67
Acquisition of property, plant and equipment (113) (120)
Proceeds from disposal of property, plant and equipment 6 7
Acquisition of intangible assets (86) (72)
Acquisition of interests in subsidiaries, associated undertakings and strategic investments (119) (23)
Disposal of interests in subsidiaries, associated undertakings and strategic investments 8 1,883
Net cash (outflow)/inflow from investing activities (1,987) 238
Cash flows from financing activities
Dividends paid to
Ordinary equity holders of the Company (336) (1,172)
Non-controlling interests and preferred security interests (183) (211)
Dividends received from associated undertakings 13 7
Interest paid (excluding banking interest paid) (51) (85)
Proceeds from issue of ordinary shares (including by subsidiaries to non-controlling interests) 11 35
Net disposal of treasury shares 55 19
Issue of subordinated and other debt 586 290
Subordinated and other debt repaid (578) (1,293)
Net cash outflow from financing activities (483) (2,410)
Net increase in cash and cash equivalents 474 206
Net decrease in cash and cash equivalents - discontinued operations - (129)
Effects of exchange rate changes on cash and cash equivalents (828) (380)
Cash and cash equivalents at beginning of the year 5,982 6,285
Cash and cash equivalents at end of the year 5,628 5,982
Consisting of
Cash and cash equivalents 4,869 5,061
Mandatory reserve deposits with central banks 759 921
Total 5,628 5,982
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
Cash flows presented in this statement include all cash flows relating to policyholders' funds.
Except for mandatory reserve deposits with central banks of GBP759 million (2012: GBP921 million) and cash and cash equivalents subject to
consolidation of funds of GBP1,667 million (2012: GBP1,893 million), management do not consider that there are any material amounts of cash and
cash equivalents which are not available for use in the Group's day-to-day operations. Mandatory reserve deposits are, however, included in cash
and cash equivalents for the purposes of the statement of cash flows in line with market practice in South Africa.
Consolidated statement of changes in equity
For the year ended 31 December 2013
Millions
Number of
shares Available-
issued and Share Share Merger for-sale
Year ended 31 December 2013 Notes fully paid capital premium reserve reserve
Shareholders' equity at beginning of the year 4,892 559 835 1,717 65
Impact of changes in accounting policies I1 - - - - -
Restated shareholders' equity at beginning of the
year 4,892 559 835 1,717 65
Profit after tax for the financial year - - - - -
Other comprehensive income
Items that will not be reclassified subsequently to
profit or loss
Fair value gains
Property revaluation - - - - -
Measurement gains on defined benefit plans - - - - -
Income tax on items that will not be reclassified
subsequently to profit or loss D1(c) - - - - -
- - - - -
Items that may be reclassified subsequently to profit
or loss
Fair value gains/(losses)
Net investment hedge - - - - -
Available-for-sale investments
Fair value losses - - - - (6)
Recycled to profit or loss - - - - (9)
Currency translation differences on translating foreign
operations - - - - -
Other movements - - - - -
Income tax on items that may be reclassified
subsequently to profit or loss D1(c) - - - - 2
Total comprehensive income for the financial year - - - - (13)
Dividends for the year C3 - - - - -
Equity share-based payment transactions - - - - -
Other movements in share capital 5 1 10 - -
Preferred securities purchased - - - - -
Change in participation in subsidiaries - - - - -
Transactions with shareholders 5 1 10 - -
Shareholders' equity at end of the year 4,897 560 845 1,717 52
GBPm
Foreign Perpetual Total
Property Share-based currency preferred Attributable to non-
revaluation payments Other translation Retained callable equity holders controlling Total
reserve reserve reserves reserve earnings securities of the parent interests equity
144 268 33 (378) 3,908 682 7,833 1,965 9,798
- - - - (17) - (17) (8) (25)
144 268 33 (378) 3,891 682 7,816 1,957 9,773
- - - - 668 37 705 278 983
17 - - - - - 17 6 23
- - - - 52 - 52 18 70
- - - - (14) 10 (4) (8) (12)
17 - - - 38 10 65 16 81
- - - 43 - - 43 - 43
- - - - - - (6) 1 (5)
- - - - - - (9) - (9)
- - - (899) - - (899) (358) (1,257)
- - 4 - (1) - 3 6 9
- - - - - - 2 - 2
17 - 4 (856) 705 47 (96) (57) (153)
- - - - (336) (47) (383) (136) (519)
- 48 - - 13 - 61 (17) 44
- - - - 55 - 66 3 69
- - - - (21) (156) (177) - (177)
- - - - (17) - (17) 17 -
- 48 - - (306) (203) (450) (133) (583)
161 316 37 (1,234) 4,290 526 7,270 1,767 9,037
Retained earnings were reduced in respect of own shares held in policyholder's funds, ESOP trusts, Black Economic Empowerment trusts and
other undertakings at 31 December 2013 by GBP428 million. (2012: GBP489 million).
Consolidated statement of changes in equity
For the year ended 31 December 2013
Millions
Number of
shares Available-
issued and Share Share Merger for-sale
Year ended 31 December 2012 Restated(1) Notes fully paid capital premium reserve reserve
Shareholders' equity at beginning of the year 5,801 580 805 2,532 53
Impact of changes in accounting policies I1 - - - - -
Restated shareholders' equity at beginning of the
year 5,801 580 805 2,532 53
Profit after tax for the financial year - - - - -
Other comprehensive income
Items that will not be reclassified subsequently
to profit or loss
Fair value gains
Property revaluation - - - - -
Measurement gain on defined benefit plans - - - - -
Income tax on items that will not be reclassified
subsequently to profit or loss D1(c) - - - - -
- - - - -
Items that may be reclassified subsequently
to profit or loss
Fair value gains/(losses)
Net investment hedge - - - - -
Available-for-sale investments
Fair value gains - - - - 33
Recycled to profit or loss - - - - (21)
Exchange differences recycled to profit or loss - - - - -
Shadow accounting - - - - 6
Currency translation differences on translating foreign
operations - - - - -
Other movements - - - - -
Income tax on items that may be reclassified
subsequently to profit or loss D1(c) - - - - (6)
Total comprehensive income for the financial year - - - - 12
Dividends for the year C3 - - - - -
Equity share-based payment transactions - - - - -
Other movements in share capital 27 3 30 - -
Cancellation of treasury shares (239) (24) - - -
Share consolidation (697) - - - -
Preferred securities purchased - - - - -
Merger reserve realised in the year - - - (815) -
Change in participation in subsidiaries - - - - -
Transactions with shareholders (909) (21) 30 (815) -
Shareholders' equity at end of the year 4,892 559 835 1,717 65
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
GBPm
Foreign Perpetual Total
Property Share-based currency preferred Attributable to non-
revaluation payments Other translation Retained callable equity holders controlling Total
reserve reserve reserves reserve earnings securities of the parent interests equity
124 230 5 301 3,170 688 8,488 2,370 10,858
- - - - (20) - (20) - (20)
124 230 5 301 3,150 688 8,468 2,370 10,838
- - - - 1,140 32 1,172 306 1,478
19 - - - - - 19 1 20
- - - - 8 - 8 - 8
- - - - (4) 10 6 - 6
19 - - - 4 10 33 1 34
- - - 160 - - 160 - 160
- - - - - - 33 1 34
- - - - - - (21) - (21)
- - - (350) - - (350) - (350)
- - - - - - 6 - 6
- - - (489) - - (489) (150) (639)
1 - 4 - (40) - (35) 10 (25)
- - - - - - (6) - (6)
20 - 4 (679) 1,104 42 503 168 671
- - - - (1,172) (42) (1,214) (169) (1,383)
- 38 - - - - 38 13 51
- - - - 7 - 40 - 40
- - 24 - - - - - -
- - - - - - - - -
- - - - (13) (6) (19) (445) (464)
- - - - 815 - - - -
- - - - - - - 20 20
- 38 24 - (363) (48) (1,155) (581) (1,736)
144 268 33 (378) 3,891 682 7,816 1,957 9,773
Notes to the consolidated financial statements
For the year ended 31 December 2013
A: Significant accounting policies
A1: Basis of preparation
The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards
as adopted by the EU. The accounting policies adopted by the Group, unless otherwise stated, have been applied consistently with those applied in
the preparation of the Group's 2012 Annual Report and Accounts.
The Group financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value:
derivative financial instruments, financial assets and liabilities designated as fair value through the income statement or as available-for-sale,
owner-occupied property and investment property. Non-current assets and disposal groups held for sale are stated at the lower of the previous
carrying amount and the fair value less costs to sell.
The Group financial statements have been prepared on the going concern basis which the directors believe to be appropriate.
The financial statements contained herein do not constitute the Company's statutory accounts for the financial years ended 31 December 2013 and
31 December 2012 within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the financial year ended 31 December
2012 have been reported on by the Company's auditor and delivered to the Registrar of Companies. The statutory accounts for the financial year
ended year ended 31 December 2013 will be delivered in due course. The report of the auditor for the financial year ended 31 December 2012 was
(i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report,
and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
Translation of foreign operations
The assets and liabilities of foreign operations are translated from their respective functional currencies into the Group's presentation currency using
the year end exchange rates, and their income and expenses using the average exchange rates. Other than in respect of cumulative translation
gains and losses up to 1 January 2004, cumulative unrealised gains or losses resulting from translation of functional currencies to the presentation
currency are included as a separate component of shareholders' equity. To the extent that these gains and losses are effectively hedged, the
cumulative effect of such gains and losses arising on the hedging instruments are also included in that component of shareholders' equity. Upon the
disposal of subsidiaries the cumulative amount of exchange differences deferred in shareholders' equity, net of attributable amounts in relation to
net investments, is recognised in the income statement. Cumulative translation gains and losses up to 1 January 2004 were reset to zero.
The principal exchange rates used to translate the operating results, assets and liabilities of key foreign business segments to pounds sterling are:
Year ended Year ended
31 December 2013 31 December 2012
Statement of Statement of
Income financial Income financial
statement position statement position
(average rate) (closing rate) (average rate) (closing rate)
Rand 15.0959 17.4284 13.0123 13.7696
US dollars 1.5650 1.6566 1.5850 1.6242
Euro 1.1782 1.2014 1.2326 1.2307
A2: Significant corporate activity and business changes during the period
Acquisitions effective during the year
Life assurance in Nigeria
On 22 February 2012, the Group announced that it had made an offer to acquire a majority stake in Oceanic Life, the life assurance operations of
Ecobank Transitional Incorporated. The Group consolidated the financial results of Oceanic Life with effect from 1 January 2013.
General insurance in Nigeria
In December 2013 the Group completed its acquisition of the majority stake in the general insurance business of Oceanic General, the general
insurance operations of Ecobank Transitional Incorporated. The balance sheet has been included in the Group consolidated statement of financial
position as at 31 December 2013.
Life assurance in Ghana
On 3 June 2013, the Group announced that it would expand its African presence through the acquisition of a majority stake in Provident Life
Assurance Company Limited. The Group consolidated the financial results of Provident Life with effect from 12 September 2013.
Platform and distribution business in Uruguay
On 19 November 2012, the Group announced that it had acquired a majority stake in AIVA Holding Group SA, a business platform and distribution
business based in Uruguay and spanning the Latin American region. The Group consolidated the financial results with effect from 19 November
2012.
Refer to note G2 for further information on the Group's acquisitions during the year.
The Group is currently progressing the following transactions
Lending in Kenya
On 3 July 2013, the Group announced that it is to enter into a strategic partnership with Faulu Kenya DTM LTD through the acquisition of a
controlling stake in the business. The completion of this transaction is subject to the conclusion of the relevant closing conditions.
Lending in Mozambique
On 3 May 2013, the Group announced that Nedbank had entered into an agreement to acquire an initial 36.4% shareholding of Banco Unico, SA,
located in Mozambique and to increase the stake to a majority shareholding over time. The completion of this transaction is subject to certain
conditions precedent being met.
Skandia Poland
On 12 November 2013, the Group announced that terms have been agreed to sell Skandia Poland, part of Old Mutual Wealth. The transaction is
subject to regulatory approvals and is expected to be completed during 2014.
The Group has completed the following intra-Group transfers during 2013
Transfer of Latin American business to Old Mutual South Africa
The Financial Services Board has approved the acquisition of Skandia Europe and Latin America Holdings Limited by Old Mutual South Africa from
Old Mutual plc and the transaction was completed on 12 July 2013. This resulted in a remittance of GBP120 million to Old Mutual plc.
Transfer of Old Mutual Guodian Life Insurance Company Limited (Guodian) to Old Mutual Life Assurance Company (South Africa) Limited
(OMLACSA)
Legal ownership of the Guodian business, the Group's Chinese joint venture, was transferred to OMLACSA during the year in order to align legal
ownership and management structures. Guodian was previously owned by the Skandia Insurance Company Limited (SICL), which was sold as part
of the sale of the Nordic businesses in 2012. The transfer of Guodian from SICL had been subject to regulatory approval. Upon transfer OMLACSA
paid consideration of GBP44 million, which was ultimately remitted to Old Mutual plc. The results of the Guodian business were reported in the
Emerging Markets segmental result in both of the years ended 31 December 2012 and 2013.
Financing activities
Repayment of Group debt
On 19 November 2013, the Group repurchased GBP75 million of its GBP348 million Tier 1 preferred callable securities and EUR121 million of its EUR495
million Upper Tier 2 preferred callable securities via a Modified Dutch Auction tender. At 31 December 2013, GBP273 million Tier 1 and EUR374 million
Upper Tier 2 preferred callable securities remained outstanding. For the year ended 31 December 2013, the Group recognised a loss of GBP21
million directly in equity, as these securities are classified as equity instruments for accounting purposes.
A total $14 million of the outstanding $16 million secured senior debt was repaid in two tranches on 1 November 2013 and 15 December 2013.
New debt issued by Nedbank
During the year, Nedbank issued R3.0 billion new-style, fully loss-absorbent, Basel lll compliant, Tier 2 subordinated-debt capital to replace the R2.1
billion of Basel II tier 2 capital that matured in September 2013 and December 2013.
Repatriation of Old Mutual Bermuda capital
In July 2013, Old Mutual Bermuda received formal written approval from the Bermuda Monitory Authority (BMA) to repatriate $450 million via
cancellation of OM Group (UK) Limited loan notes. In December 2013, the BMA approved an additional repatriation of $100 million via cancellation
of further loan notes.
(a) Loans and advances
Provisions for impairment of loans and advances
The majority of loans and advances are in respect of Nedbank, which assesses its loan portfolios for impairment at each financial reporting date.
Nedbank actively manages its exposure to loans and advances through robust credit approval processes. The credit loss ratio at year ended 31
December 2013 was 1.06% (2012: 1.05%). The impairment for performing loans is calculated on a portfolio basis, based on historical loss
experience, adjusted for national and industry specific economic conditions and other indicators present at the reporting date that correlate with
defaults on the portfolio. These include early arrears and other indicators of potential default, such as changes in macro-economic conditions and
legislation affecting credit recovery. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss
emergence period.
For portfolios which comprise large numbers of small homogenous assets with similar risk characteristics where credit scoring techniques are
generally used, statistical techniques are used to calculate impairment allowances on the portfolio, based on historical recovery rates and assumed
emergence periods. There are a number of models in use, each tailored to a product, line of business or client category. Judgement and knowledge
are needed in selecting the statistical methods to use when the models are developed or revised.
For wholesale (larger) exposures impairment allowances are calculated on an individual basis and all relevant considerations that have a bearing
on the expected future cash flows are taken into account. The level of impairment allowance is the difference between the value of the discounted
expected future cash flows and its carrying amount. Subjective judgements are made in the calculations of future cash flows and change with time
as new information becomes available or as strategies evolve, resulting in frequent revisions to the impairment provision as individual decisions are
taken.
Further detail is provided in note E3 in the Annual Report and Accounts.
(b) Policyholder liabilities
Emerging Markets discretionary reserves
Technical provisions in South Africa are derived as the aggregate of:
- Best estimate liabilities, with assumptions allowing for the best estimate of future experience and a market-consistent valuation of financial
options and guarantees
- Compulsory margins, prescribed in the South African professional actuarial guidance note (SAP 104) as explicit changes to actuarial
assumptions that increase the level of technical provisions held, and
- Discretionary margins, permitted by SAP 104, to allow for the uncertainty inherent in estimates of future experience after considering available
options of managing that experience over time, or to defer the release of profits consistent with policy design or company practice
Discretionary margins are held as either implicit or explicit margins. Explicit discretionary margins are derived as conscious changes to assumptions
used to project future experience to increase technical provisions. Implicit discretionary margins arise where the method used to calculate overall
technical provisions results in liabilities that are greater than the sum of best estimate liabilities and compulsory margins.
Explicit discretionary margins of GBP489 million (1.9% of total technical provisions) were held at 31 December 2013. This consisted largely of:
- Margins held for Mass Foundation Cluster protection business, which allow for the uncertainty related to the future progression of the AIDS
pandemic in South Africa, as well as future lapse experience and future investment returns, and to ensure that profit is released appropriately
over the term of the policies
- Margins to allow for the uncertainty inherent in the assumptions used to value financial options and guarantees, implied volatility assumptions
in particular, which are difficult to hedge due to the short term nature of the equity option market in South Africa
- Margins on non-profit annuities, due to the inability to fully match assets to liabilities as a result of the limited availability of long-dated bonds,
and to provide for longevity risk, and
- A margin set up in 2013 to allow for the uncertainty inherent in future economic assumptions used to calculate, mainly protection product
liabilities, in the Retail Affluent business. Although interest rate hedging is used to manage interest rate risk on these products, the volatility of
bond yields in South Africa means that it is difficult to maintain appropriate hedging positions without incurring significant trading costs. The
discretionary margin therefore caters for the residual uncertainty present after allowing for the hedge programme that is in place.
Emerging Markets Financial Soundness Valuation discount rate
The calculation of the Group's South African life assurance contract liabilities is sensitive to the discount rate used to value the liabilities. The
methodology applied by the Group requires discount rates to be set according to the South African professional guidance note (SAP 104). In line
with these principles, the reference rate is selected as the Bond Exchange of South Africa (BESA) par bond 10-year yield.
The reference rate was relatively volatile over 2013, ranging from 6.2% to 8.5% during the year ended 31 December 2013 (2012: 6.9% to 8.2%). At
31 December 2013 the reference discount rate was 8.1% (31 December 2012: 6.9%). The volatile interest rate environment had a much smaller
impact on the operating profit for the South African life assurance businesses in 2013, given the management actions taken over 2013 to mitigate
these impacts. These included the continuance of the hedging program put in place during the second half of 2012, the establishment of
discretionary margins to allow for the uncertainty in respect of interest rate volatility in Retail Affluent, and changes to the annual premium and cover
increase policy on Mass Foundation Cluster funeral products.
The Group estimates that a 1% reduction in the reference discount rate will result in an increase in policyholder liabilities of GBP6 million (2012:
GBP39 million), allowing for the impact of the hedging program. The 2013 impact is significantly lower than 2012 mainly, due to the management
actions taken to reduce the impact of changing discount rates on operating profit, as well as the depreciation of the rand which reduced the impact
in sterling terms.
Further disclosure of the policyholder sensitivity to interest rates is provided in note E8(g) in the Annual Report and Accounts.
Old Mutual Bermuda guarantees
Since the closure of Old Mutual Bermuda to new business in March 2009, management's key priorities have been to de-risk the business, manage
the risk and solvency position and preserve shareholder value. The run-off of the book and hedging of the guarantees significantly reduces the
Group's risk exposure. The active contracts for which reserves are held are deferred and fixed index annuity investments and variable annuity
products, which include guaranteed minimum accumulation benefits (GMAB) and guaranteed minimum death benefits (GMDB). The key risk to the
Group relates to the 120% of the initial deposit (or, if elected, the highest anniversary account value) on the 10th anniversary which will commence
in 2017. The Group has implemented a hedging strategy to protect against markets rising above the 120% guarantee and then subsequently falling,
which would reset some guarantees above 120%, with account values at a lower level. This reduces the uncertainty and volatility of capital
exposure and cash flows arising from the highest anniversary value guarantees. The remaining 120% of premium guarantee, relating to equity and
foreign exchange downside risks, for the 10-year obligations are being managed by the dynamic hedge programme. There are no significant risks
to the Group associated with GMDB and management continues to operate strong oversight over the business.
During 2013 the business continued to experience high rates of surrender activity which can be attributed to the variable annuity UGO (Universal
Guarantee Option) GMAB policyholders passing through a top-up process on the fifth anniversary following product inception. This process was
completed in 2013. The reduced size of the book has meant that the associated GMAB reserves have reduced from $229 million at 31 December
2012 to $84 million at 31 December 2013.
(c) Tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it
relates to items recognised directly in other comprehensive income, in which case it is recognised in other comprehensive income.
The Group is regularly in discussion with the respective tax authorities in each of the jurisdictions where the Group is active. The Group applies its
judgement to determine if a provision for future tax uncertainties should be recognised based on detailed reviews of any potential exposure to tax
authorities and the assessment of the most probable outcome of the tax uncertainty. As these provisions are based on estimates and rely on
judgements made by the Group, the actual amount of future taxes paid by the Group could be different to the amounts provided.
(d) Consolidation set of standards
The Group has applied the following key judgements in the application of the requirements of the consolidation set of standards (IFRS 10
'Consolidated Financial Statements' and IFRS 11 'Joint Arrangements'):
Consolidation of investment funds and securitisation vehicles
The Group acts as a fund manager to a number of investment funds. In determining whether the Group controls such a fund, it will focus on an
assessment of the aggregate economic interests of the Group (comprising any carried interests and expected management fees) and the investor's
rights to remove the fund manager. The Group assesses, on an annual basis, such interests to determine if the fund will be consolidated. See note
G3(b) in the Annual Report and Accounts for disclosures in respect of the investment funds in which the Group has an interest.
The Group has sponsored certain asset backed financing (securitisation) vehicles under its securitisation programme which are run according to
pre-determined criteria that are part of the initial design of the vehicles. The Group is exposed to variability of returns from the vehicles through its
holding of junior debt securities in the vehicles. It has concluded that it controls these vehicles and therefore has consolidated these asset backed
financing vehicles.
Structured entities
The Group is required to make judgements on what constitutes a structured entity. Accounting standards define a structured entity as an entity
designed so that its activities are not governed by way of voting rights. In assessing whether the Group has power over such investees in which it
has an interest, the Group considers factors such as the purpose and design of the investee, its practical ability to direct the relevant activities of the
investee, the nature of its relationship with the investee and the size of its exposure to the variability of returns of the investee. The Group has
evaluated all exposures and has concluded that all investments in investment funds and securitisation vehicles represent investments in structured
entities.
B: Segment information
B1: Basis of segmentation
The Group's segmental results are analysed and reported on a basis consistent with the way that management and the Board of directors assesses
performance and allocates resources. Information is presented to the Board on a consolidated basis in pounds sterling (the presentation currency) and in
the functional currency of each business.
Adjusted operating profit is one of the key measures reported to the Group's management and Board of directors for their consideration in the
allocation of resources to and the review of performance of the segments. The Group utilises additional measures to assess the performance of
each of the segments, depending on the business line, this typically includes net client cash flows, funds under management, gross earned
premiums, underwriting results, net interest income and non-interest revenue and credit losses.
A reconciliation between the segment revenues and expenses and the Group's revenues and expenses is shown in note B3. Consistent with internal
reporting, assets, liabilities, revenues and expenses that are not directly attributable to a particular segment are allocated between segments where
appropriate and where there is a reasonable basis for doing so. The Group accounts for inter-segment revenues and transfers as if the transactions
were with third parties at current market prices. Given the nature of the operations, there are no major trading activities between the segments.
The revenues generated in each reported segment can be seen in the analysis of profits and losses in note B3. The segmental information in notes
B3 and B4, reflects the adjusted and IFRS measures of profit and loss and the assets and liabilities for each operating segment as provided to
management and the Board of directors. There are no differences between the measurement of the assets and liabilities reflected in the primary
statements and that reported for the segments.
There are four primary business activities from which the Group generates revenues. These are life assurance (premium income), asset
management business (fee and commission income), banking (banking interest receivable) and general insurance (premium income). The principal
lines of business from which each operating segment derives its revenues are as follows:
Core operations
Emerging Markets – life assurance and asset management
Old Mutual Wealth – life assurance and asset management
Property & Casualty – general insurance
Nedbank – banking and asset management
US Asset Management – asset management
Non-core operations
Old Mutual Bermuda – life assurance
Segment presentation
In the 2012 Annual Report and Accounts, the Group announced that, with effect from 1 January 2013, all of the Group's Property & Casualty
activities would be reported as a single segment. Consequently, the Mutual & Federal (M&F) segment has been renamed as Property & Casualty.
This segment includes M&F, 100% of iWyze, previously reported as a 50% joint venture between Emerging Markets and M&F, and the general
insurance businesses in Namibia and Botswana. The name change has been applied to all reporting periods. Comparative information for the year
ended 31 December 2012 has been restated accordingly.
In addition to the above, the Long-Term Savings aggregation has been removed from the adjusted operating profit statement, segmental
information and in the statement of financial position in notes B3 and B4 of the annual financial statements. The Long-Term Savings segment was a
sub total of the Emerging Markets and Old Mutual Wealth segments which the Group previously elected to disclose. This presentational change has
been applied to all reporting periods.
The Group's reported segments are now Emerging Markets, Old Mutual Wealth, Property & Casualty, Nedbank and US Asset Management
(USAM). The Other segment includes Group head office. Old Mutual Bermuda is the principal component of the non-core operations. For all
reporting periods, Old Mutual Bermuda is classified as a continuing operation in the IFRS income statement, but as non-core in determining the
Group's adjusted operating profit.
The Group continues to incur costs related to the sale of its Nordic business in 2012. These costs largely relate to the transition of IT information
and support services that were previously provided by the Nordic business to the wider Group, back to the Group. These costs are included in the
expenses related to the discontinued operations in the annual financial statements for the year ended 31 December 2013. Further information on
the results of discontinued operations is provided in note H1. The Nordic business has been classified as a discontinued operation in the IFRS
consolidated income statement and its results as non-core in determining the Group's adjusted operating profit.
All other businesses have been classified as continuing operations for all reporting periods.
B2: Gross earned premiums and deposits to investment contracts
GBPm
Emerging Old Mutual Property &
Year ended 31 December 2013 Markets Wealth Casualty Total
Life assurance – insurance contracts 1,616 336 - 1,952
Life assurance – investment contracts with discretionary
participation features 1,025 - - 1,025
General insurance - - 724 724
Gross earned premiums 2,641 336 724 3,701
Life assurance – other investment contracts recognised
as deposits 2,015 5,889 - 7,904
GBPm
Emerging Old Mutual Property &
Year ended 31 December 2012 Markets Wealth Casualty Total
Life assurance – insurance contracts 1,673 362 - 2,035
Life assurance – investment contracts with discretionary
participation features 970 - - 970
General insurance - - 720 720
Gross earned premiums 2,643 362 720 3,725
Life assurance – other investment contracts recognised
as deposits 2,022 5,699 - 7,721
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2013
Emerging Old Mutual Property &
Markets Wealth Casualty
Revenue
Gross earned premiums B2 2,641 336 724
Outward reinsurance (80) (87) (150)
Net earned premiums 2,561 249 574
Investment return (non-banking) 5,153 4,159 31
Banking interest and similar income - - -
Banking trading, investment and similar income - - -
Fee and commission income, and income from service activities 527 1,173 25
Other income 39 21 -
Inter-segment revenues 61 1 14
Total revenue 8,341 5,603 644
Expenses
Claims and benefits (including change in insurance contract provisions) (4,505) (347) (556)
Reinsurance recoveries 79 45 122
Net claims and benefits incurred (4,426) (302) (434)
Change in investment contract liabilities (1,952) (3,921) -
Losses on loans and advances - - -
Finance costs (including interest and similar expenses) - - -
Banking interest payable and similar expenses - - -
Fee and commission expenses, and other acquisition costs (228) (622) (113)
Change in third-party interest in consolidated funds - - -
Other operating and administrative expenses (1,088) (408) (77)
Income tax attributable to policyholder returns (62) (112) -
Inter-segment expenses (6) (21) (19)
Total expenses (7,762) (5,386) (643)
Share of associated undertakings' and joint ventures' profit after tax 11 - 3
Loss on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) - - -
Adjusted operating profit/(loss) before tax and non-controlling
interests 590 217 4
Income tax expense D1 (155) (40) -
Non-controlling interests (11) - (5)
Adjusted operating profit/(loss) after tax and non-controlling
interests 424 177 (1)
Adjusting items net of tax and non-controlling interests C1(a) (74) (139) (10)
Profit/(loss) after tax from continuing operations 350 38 (11)
Profit from discontinued operations after tax H1(a) - - -
Profit/(loss) after tax attributable to equity holders of the parent 350 38 (11)
(1) Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the year ended 31 December 2013 was GBP32 million. Non-core
operations also include a net gain of GBP3 million divestment cost and additional proceeds received in relation to the Nordic business sold in 2012. Further information
on discontinued operations is provided in note H1.
Of the total revenues, excluding intercompany revenues, GBP4,947 million was generated in the UK (2012: GBP4,318), GBP864 million in the rest
of Europe (2012: GBP1,196 million), GBP13,446 million in Southern Africa (2012: GBP13,966 million), GBP439 million in United States (2012:
GBP529 million) and GBP114 million relates to other operating segments (2012: GBP83 million).
GBPm
Adjusting Discontinued IFRS
Consolidation Adjusted items and non-core Income
Nedbank USAM Other adjustments operating profit (note C1) operations(1) statement
- - - - 3,701 - - 3,701
- - - - (317) - - (317)
- - - - 3,384 - - 3,384
- - 68 634 10,045 (94) 35 9,986
3,050 - - - 3,050 - - 3,050
195 - - - 195 - - 195
1,048 381 - 8 3,162 (67) - 3,095
31 3 (2) 2 94 - 6 100
11 - 8 (106) (11) - 11 -
4,335 384 74 538 19,919 (161) 52 19,810
- - - - (5,408) - (2) (5,410)
- - - - 246 - - 246
- - - - (5,162) - (2) (5,164)
- - - - (5,873) - - (5,873)
(368) - - - (368) - - (368)
- - (92) - (92) 11 - (81)
(1,616) - - - (1,616) - - (1,616)
(12) (4) - (70) (1,049) 78 (5) (976)
- - - (564) (564) - - (564)
(1,495) (274) (78) (10) (3,430) (210) (13) (3,653)
- - - - (174) 174 - -
(49) - (11) 106 - - - -
(3,540) (278) (181) (538) (18,328) 53 (20) (18,295)
2 5 - - 21 - - 21
- - - - - (4) - (4)
797 111 (107) - 1,612 (112) 32 1,532
(200) (27) (2) - (424) (128) - (552)
(282) - - - (298) 20 - (278)
315 84 (109) - 890 (220) 32 702
12 (30) 21 - (220) 220 - -
327 54 (88) - 670 - 32 702
- - - - - - 3 3
327 54 (88) - 670 - 35 705
B3: Adjusted operating profit statement - segment information for the year ended 31 December 2012 Restated(1)
Emerging Old Mutual Property &
Markets Wealth Casualty
Revenue
Gross earned premiums B2 2,643 362 720
Outward reinsurance (82) (87) (153)
Net earned premiums 2,561 275 567
Investment return (non-banking) 5,288 3,806 44
Banking interest and similar income - - -
Banking trading, investment and similar income - - -
Fee and commission income, and income from service activities 440 1,199 26
Other income 61 26 1
Inter-segment revenues 83 3 18
Total revenue 8,433 5,309 656
Expenses
Claims and benefits (including change in insurance contract provisions) (4,813) (387) (485)
Reinsurance recoveries 89 59 73
Net claims and benefits incurred (4,724) (328) (412)
Change in investment contract liabilities (1,756) (3,605) -
Losses on loans and advances - - -
Finance costs (including interest and similar expenses) - - -
Banking interest payable and similar expenses - - -
Fee and commission expenses, and other acquisition costs (227) (677) (113)
Change in third-party interest in consolidated funds - - -
Other operating and administrative expenses (1,066) (446) (82)
Income tax attributable to policyholder returns (49) (26) -
Inter-segment expenses (20) (32) (14)
Total expenses (7,842) (5,114) (621)
Share of associated undertakings' and joint ventures' profit after tax 20 - 2
Loss on disposal of subsidiaries, associated undertakings
and strategic investments C1(c) - - -
Adjusted operating profit/(loss) before tax and non-controlling interests 611 195 37
Income tax expense D1 (164) (43) (9)
Non-controlling interests (9) - (8)
Adjusted operating profit/(loss) after tax and non-controlling interests 438 152 20
Adjusting items net of tax and non-controlling interests C1(a) (153) (134) (15)
Profit/(loss) after tax from continuing operations 285 18 5
Profit from discontinued operations after tax H1(a) - - -
Profit/(loss) after tax attributable to equity holders of the parent 285 18 5
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
(2) Non-core operations relate to Old Mutual Bermuda. Old Mutual Bermuda profit after tax for the year ended 31 December 2012 was GBP161 million. It also includes
GBP4 million of inter-segment revenue and the after tax results of the Group's discontinued operations. Further information on discontinued operations is provided in
note H1.
GBPm
Adjusted Adjusting Discontinued IFRS
Consolidation operating items and non-core Income
Nedbank USAM Other adjustments profit (note C1) operations(2) statement
- - - - 3,725 - - 3,725
- - - - (322) - - (322)
- - - - 3,403 - - 3,403
- 1 75 722 9,936 (191) 135 9,880
3,431 - - - 3,431 - - 3,431
214 - - - 214 - - 214
1,084 360 - 6 3,115 (76) - 3,039
23 1 - (1) 111 - 14 125
21 - 7 (156) (24) - 24 -
4,773 362 82 571 20,186 (267) 173 20,092
- - - - (5,685) - 73 (5,612)
- - - - 221 - - 221
- - - - (5,464) - 73 (5,391)
- - - - (5,361) - - (5,361)
(400) - - - (400) - - (400)
- - (130) - (130) (84) - (214)
(1,886) - - - (1,886) (1) - (1,887)
- (5) - (67) (1,089) 88 (63) (1,064)
- - - (651) (651) - - (651)
(1,604) (276) (67) (9) (3,550) (147) (18) (3,715)
- - - - (75) 75 - -
(58) - (32) 156 - - - -
(3,948) (281) (229) (571) (18,606) (69) (8) (18,683)
- 10 - - 32 - - 32
- - - - - (56) - (56)
825 91 (147) - 1,612 (392) 165 1,385
(221) (15) 12 - (440) (31) - (471)
(287) - (27) - (331) 25 - (306)
317 76 (162) - 841 (398) 165 608
16 (10) (102) - (398) 398 - -
333 66 (264) - 443 - 165 608
- - - - - - 564 564
333 66 (264) - 443 - 729 1,172
B4: Statement of financial position – segment information at 31 December 2013
Emerging Old Mutual Property &
Notes Markets Wealth Casualty
Assets
Goodwill and other intangible assets 123 1,461 11
Mandatory reserve deposits with central banks - - -
Property, plant and equipment 281 12 22
Investment property 1,443 - -
Deferred tax assets 88 20 16
Investments in associated undertakings and joint ventures 73 - 3
Deferred acquisition costs 91 1,094 16
Reinsurers' share of policyholder liabilities 61 1,690 113
Loans and advances 58 183 -
Investments and securities 28,492 49,868 297
Current tax receivable 9 84 3
Trade, other receivables and other assets 617 426 96
Derivative financial instruments 349 - -
Cash and cash equivalents 611 687 91
Non-current assets held for sale - 5 -
Inter-segment assets 610 93 25
Total assets 32,906 55,623 693
Liabilities
Life assurance policyholder liabilities 28,043 51,327 -
General insurance liabilities - - 332
Third-party interests in consolidated funds - - -
Borrowed funds E1 172 - -
Provisions 125 32 8
Deferred revenue 7 610 11
Deferred tax liabilities 169 254 13
Current tax payable 125 52 -
Trade, other payables and other liabilities 1,821 786 126
Amounts owed to bank depositors 280 7 -
Derivative financial instruments 466 - -
Non-current liabilities held for sale - - -
Inter-segment liabilities 197 312 -
Total liabilities 31,405 53,380 490
Net assets 1,501 2,243 203
Equity
Equity attributable to equity holders of the parent 1,471 2,243 183
Non-controlling interests 30 - 20
Ordinary shares F1(b) 30 - 20
Preferred securities F1(b) - - -
Total equity 1,501 2,243 203
The net assets of Emerging Markets are stated after eliminating investments in Group equity and debt instruments of GBP302 million (2012:
GBP364 million) held in policyholder funds. These include investments in the Company's ordinary shares and subordinated liabilities and preferred
securities issued by the Group's banking subsidiary Nedbank Limited. All Emerging Markets debt relates to life assurance. All other debt relates to
other shareholders' net assets.
GBPm
Consolidation Non-core
Nedbank USAM Other adjustments operations Total
446 794 - - - 2,835
759 - - - - 759
391 15 1 - - 722
11 - - 357 - 1,811
11 167 - - 1 303
63 19 10 - - 168
- 10 - - - 1,211
11 - - - - 1,875
33,145 - - - - 33,386
5,387 33 378 3,502 460 88,417
32 - - - - 128
585 113 43 351 352 2,583
791 - 62 49 8 1,259
1,196 117 457 1,667 43 4,869
- - - - - 5
77 21 976 (2,083) 281 -
42,905 1,289 1,927 3,843 1,145 140,331
852 - - - 919 81,141
- - - - - 332
- - - 5,478 - 5,478
1,813 2 642 - - 2,629
40 2 29 - - 236
- - - - - 628
34 - 21 - - 491
17 3 40 - - 237
832 248 40 412 9 4,274
34,083 - - - - 34,370
974 - - 36 2 1,478
- - - - - -
567 487 520 (2,083) - -
39,212 742 1,292 3,843 930 131,294
3,693 547 635 - 215 9,037
1,976 547 635 - 215 7,270
1,717 - - - - 1,767
1,452 - - - - 1,502
265 - - - - 265
3,693 547 635 - 215 9,037
B4: Statement of financial position – segment information at 31 December 2012 Restated(1)
Emerging Old Mutual Property &
Notes Markets Wealth Casualty
Assets
Goodwill and other intangible assets 98 1,594 14
Mandatory reserve deposits with central banks - - -
Property, plant and equipment 336 13 20
Investment property 1,588 - -
Deferred tax assets 82 44 20
Investments in associated undertakings and joint ventures 57 - 2
Deferred acquisition costs 103 1,159 18
Reinsurers' share of policyholder liabilities 55 1,236 100
Loans and advances 142 180 -
Investments and securities 31,157 45,402 397
Current tax receivable 16 64 5
Trade, other receivables and other assets 714 333 92
Derivative financial instruments 612 - -
Cash and cash equivalents 816 576 109
Non-current assets held for sale - 5 -
Inter-segment assets 562 101 43
Total assets 36,338 50,707 820
Liabilities
Life assurance policyholder liabilities 31,124 46,455 -
General insurance liabilities - - 346
Third-party interests in consolidated funds - - -
Borrowed funds E1 218 - -
Provisions 120 54 11
Deferred revenue 11 667 10
Deferred tax liabilities 130 189 21
Current tax payable 198 39 -
Trade, other payables and other liabilities 2,238 669 146
Amounts owed to bank depositors 86 - -
Derivative financial instruments 377 - -
Non-current liabilities held for sale - - -
Inter-segment liabilities 216 587 2
Total liabilities 34,718 48,660 536
Net assets 1,620 2,047 284
Equity
Equity attributable to equity holders of the parent 1,606 2,047 261
Non-controlling interests 14 - 23
Ordinary shares F1(b) 14 - 23
Preferred securities F1(b) - - -
Total equity 1,620 2,047 284
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
GBPm
Consolidation Non-core
Nedbank USAM Other adjustments operations Total
534 816 - - - 3,056
921 - - - - 921
465 12 1 - - 847
15 - - 344 - 1,947
34 162 2 - 1 345
49 18 26 - - 152
- 8 - - - 1,288
15 - - - - 1,406
38,173 - - - - 38,495
6,303 37 368 3,897 952 88,513
18 - - - - 103
733 105 62 372 595 3,006
1,003 - 97 50 18 1,780
1,049 115 379 1,892 125 5,061
37 - - - - 42
111 21 1,366 (2,877) 673 -
49,460 1,294 2,301 3,678 2,364 146,962
907 - - - 1,702 80,188
- - - - - 346
- - - 6,116 - 6,116
2,163 10 659 - - 3,050
49 1 30 - - 265
1 - - - - 689
40 - 24 - - 404
9 6 34 - 1 287
1,122 193 80 400 92 4,940
39,413 - - - - 39,499
977 - 8 39 1 1,402
3 - - - - 3
596 554 922 (2,877) - -
45,280 764 1,757 3,678 1,796 137,189
4,180 530 544 - 568 9,773
2,283 507 544 - 568 7,816
1,897 23 - - - 1,957
1,624 23 - - - 1,684
273 - - - - 273
4,180 530 544 - 568 9,773
C: Other key performance information
C1: Operating profit adjusting items
(a) Summary of adjusting items for determination of AOP
In determining the AOP of the Group for core operations, certain adjustments are made to profit before tax to reflect the directors' view of the
underlying long-term performance of the Group. The following table shows an analysis of those adjustments from AOP to profit before and after tax.
GBPm
Year ended Year ended
31 December 31 December
Notes 2013 2012
Income/(expense)
Goodwill impairment and impact of acquisition accounting C1(b) (141) (123)
Loss on disposal of subsidiaries, associated undertakings and strategic investments C1(c) (4) (56)
Short-term fluctuations in investment return C1(d) 6 (78)
Investment return adjustment for Group equity and debt instruments held in life funds C1(e) (100) (113)
Dividends declared to holders of perpetual preferred callable securities C1(f) 42 42
US Asset Management equity plans C1(g) (38) (13)
Credit-related fair value losses on Group debt instruments C1(h) (31) (126)
Restructuring costs C1(i) (20) -
Total adjusting items (286) (467)
Tax on adjusting items D1(d) 46 44
Non-controlling interest in adjusting items 20 25
Total adjusting items after tax and non-controlling interests (220) (398)
(b) Goodwill impairment and impact of acquisition accounting
When applying acquisition accounting, deferred acquisition costs and deferred revenues existing at the point of acquisition are not recognised under
IFRS. These are reversed in the acquisition statement of financial position and replaced by goodwill, other intangible assets and the value of the
acquired present value of in-force business (acquired PVIF). In determining AOP, the Group recognises deferred revenue and acquisition costs and
deferred revenue in relation to policies sold by acquired businesses pre-acquisition. The Group excludes the impairment of goodwill and the
amortisation and impairment of acquired other intangibles and acquired PVIF and the movements in certain acquisition date provisions. Costs
incurred on successful acquisitions are also excluded from AOP. If the intangible assets recognised as a result of a business combination are
subsequently impaired, this is excluded from AOP. The effect of these adjustments to determine AOP are summarised below:
GBPm
Emerging Old Mutual
Year ended 31 December 2013 Markets Wealth USAM Total
Amortisation of acquired PVIF - (76) - (76)
Amortisation of acquired deferred costs and revenue - 11 - 11
Amortisation of other acquired intangible assets (2) (46) - (48)
Impairment of goodwill and other intangible assets (8) (20) - (28)
(10) (131) - (141)
GBPm
Emerging Old Mutual
Year ended 31 December 2012 Markets Wealth USAM Total
Amortisation of acquired PVIF - (84) - (84)
Amortisation of acquired deferred costs and revenue - 12 - 12
Amortisation of other acquired intangible assets (2) (48) (1) (51)
Impairment of goodwill and other intangible assets - - - -
(2) (120) (1) (123)
(c) Loss on disposal of subsidiaries, associated undertakings and strategic investments
Loss on disposal of subsidiaries, associated undertakings and strategic investments is analysed below:
GBPm
Year ended Year ended
31 31
December December
2013 2012
USAM (4) (16)
Emerging Markets - (15)
Old Mutual Wealth - (25)
Loss on disposal of subsidiaries, associated undertakings and strategic investments (4) (56)
USAM
On 2 January 2013, USAM completed the sale of five of its affiliates incurring a loss of GBP1 million.
On 11 October 2013, USAM committed to a plan to cease the operations of Echo Point. The incremental cost of GBP3 million associated with
discontinuing the entity was recognised in full during October 2013.
On 13 April 2012, USAM disposed of Old Mutual Capital, Inc, a subsidiary, at a profit of GBP12 million. On 15 May 2012, USAM disposed of Dwight
Asset Management Company LLC, a fixed income affiliate, at a profit of GBP7 million. On 11 October 2012, the Group announced that it had
finalised agreements to sell five USAM affiliates at a loss of GBP32 million. A GBP3 million loss was also recognised during the year ended 31
December 2012 in relation to disposals of other USAM subsidiaries in previous periods.
Emerging Markets
On 20 November 2012, the Emerging Markets segment recognised a profit of GBP3 million on the acquisition of a strategic investment Curo Fund
Services (Pty) Ltd. Also during the year ended 31 December 2012, the Group incurred expenses of GBP18 million as initial costs regarding
Zimbabwean Indigenisation and Black Economic Empowerment Schemes. These costs were directly related to the acquisition of the Zimbabwean
business.
Old Mutual Wealth
On 31 August 2012, Old Mutual Wealth completed the sale of its Finnish branch at a loss of GBP27 million. A profit of GBP2 million was recognised
on the sale of Skandia Services AG (Switzerland) on 30 June 2012.
(d) Short-term fluctuations in investment return
Profit before tax, as disclosed in the consolidated IFRS income statement, includes actual investment returns earned on the shareholder assets of
the Group's life assurance and general insurance businesses. AOP is stated after recalculating shareholder asset investment returns based on a
long-term investment return rate. The difference between the actual and the long-term investment returns is referred to as the short-term fluctuation
in investment return.
Long-term rates of return are based on achieved rates of return appropriate to the underlying asset base, adjusted for current inflation expectations,
default assumptions, costs of investment management and consensus economic investment forecasts. The underlying rates are principally derived
with reference to 10-year government bond rates, cash and money market rates and an explicit equity risk premium for South African businesses.
The rates set out below reflect the apportionment of underlying investments in cash deposits, money market instruments and equity assets. Long-
term rates of return are reviewed frequently by the Board, usually annually, for appropriateness. The review of the long-term rates of return seeks to
ensure that the returns credited to adjusted operating profit are consistent with the actual returns expected to be earned over the long-term.
For Emerging Markets, the return is applied to an average value of investible shareholders' assets, adjusted for net fund flows. For Old Mutual
Wealth, the return is applied to average investible assets. For Property & Casualty, the return is an average value of investible assets supporting
shareholders' funds and insurance liabilities, adjusted for net fund flows.
%
Year Year
ended ended
31 December 31 December
Long-term investment rates 2013 2012
Emerging Markets 8.0 9.0
Old Mutual Wealth 1.0 1.5 - 2.0
Property & Casualty 7.4 8.6
Analysis of short-term fluctuations in investment return
GBPm
Emerging Old Mutual Property &
Year ended 31 December 2013 Markets Wealth¹ Casualty Other Total
Actual shareholder investment return 135 22 25 34 216
Less: Long-term investment return 106 30 31 43 210
Short-term fluctuations in investment return 29 (8) (6) (9) 6
GBPm
Emerging Old Mutual Property &
Year ended 31 December 2012 Markets Wealth¹ Casualty Other Total
Actual shareholder investment return 81 65 34 34 214
Less: Long-term investment return 124 67 47 54 292
Short-term fluctuations in investment return (43) (2) (13) (20) (78)
(1) Old Mutual Wealth long-term investment return includes GBP25 million (2012: GBP59 million) transitional adjustments to restate the effects of policyholder tax in
arriving at AOP.
(e) Investment return adjustment for Group equity and debt instruments held in policyholder funds
AOP includes investment returns on policyholder investments in Group equity and debt instruments held by the Group's life funds. These include
investments in the Company's ordinary shares and the subordinated liabilities and ordinary shares issued by Nedbank. These investment returns
are eliminated within the consolidated income statement in arriving at profit before tax in the IFRS income statement, but are included in adjusted
operating profit. During the year ended 31 December 2013, the investment return adjustment increased AOP by GBP100 million (2012: increase of
GBP113 million).
(f) Dividends declared to holders of perpetual preferred callable securities
Dividends declared to the holders of the Group's perpetual preferred callable securities on an adjusted operating profit basis were GBP42 million for
the year ended 31 December 2013 (2012: GBP42 million). These are recognised in finance costs on an accruals basis for the purpose of
determining adjusted operating profit. In accordance with IFRS the total cash distribution of GBP47 million (2012: GBP42 million) is recognised
directly in equity. This distribution included GBP5 million accrued interest paid in respect of securities accepted for repurchase.
(g) US Asset Management equity plans
US Asset Management has a number of long-term incentive arrangements with senior employees in its asset management affiliates.
The Group has issued put options in equities in the affiliates to senior employees as part of its US affiliate incentive schemes. The impact of
revaluing these instruments is recognised in accordance with IFRS, but excluded from AOP. At 31 December 2013, these instruments were revalued, the
impact of which was a loss of GBP38 million (2012: loss of GBP13 million).
(h) Credit-related fair value gains and losses on Group debt instruments
The widening of credit spread is related to the Group's debt instruments causes the market value of these instruments to decrease, resulting in
gains being recognised in the consolidated income statement. Conversely, if the credit spread narrows and the market value of debt instruments
rises then losses are recognised in the consolidated income statement. In the directors' view, such movements are not reflective of the underlying
performance of the Group and will reverse over time and they have therefore been excluded from AOP. For the year ended 31 December 2013 a
net loss of GBP31 million was recognised (2012: loss of GBP55 million).
On 1 August 2012, the Group redeemed GBP388 million of the GBP500 million senior bond due in 2016 at a cash consideration of GBP459 million.
The GBP71 million excess over the nominal value reflected the market value of the instrument prior to redemption.
(i) Old Mutual Wealth restructuring expenditure
The Old Mutual Wealth business embarked on a significant change project to fundamentally restructure the way in which its UK platform business
operates. Over the next two to three years, it will migrate certain elements of service provision to International Financial Data Services (IFDS).
Costs related to decommissioning of existing technology and service provision and the migration of service to IFDS will be excluded from AOP.
These costs will comprise payments to IFDS and directly attributable internal project costs and totalled GBP20 million in 2013.
C2: Earnings and earnings per share
The Group calculates earnings per share (EPS) on several different bases. IFRS requires the calculation of basic and diluted EPS. Adjusted
operating EPS reflects earnings per share consistent with the Group's alternative profit measure. JSE Limited (JSE) Listing Requirements also
require the Group to calculate headline EPS. The Group's EPS on these different bases are summarised below:
Pence
Year ended
Year ended 31 December
31 December 2012
Source of guidance Notes 2013 Restated
Basic earnings per share(1) IFRS C2(a) 15.0 24.9
Diluted basic earnings per share(1) IFRS C2(b) 13.9 23.1
Adjusted operating earnings per share Group policy C2(c) 18.4 17.5
Headline earnings per share (Gross of tax)(2) JSE Listing Requirements C2(d) 15.6 13.5
Headline earnings per share (Net of tax)(2) JSE Listing Requirements C2(d) 15.2 13.8
Diluted headline earnings per share (Gross of tax)(2) JSE Listing Requirements C2(d) 14.6 12.7
Diluted headline earnings per share (Net of tax)(2) JSE Listing Requirements C2(d) 14.3 12.9
(1) Restatement for the impact of changes in policies did not result in changes to basic, diluted basic and adjusted operating earnings per share for the year ended 31
December 2012.
(2) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit for the financial year attributable to ordinary equity shareholders by the weighted
average number of ordinary shares in issue during the year excluding own shares held in policyholder funds, ESOP trusts, Black Economic Empowerment
trusts and other related undertakings.
The table below reconciles the profit attributable to equity holders of the parent to profit attributable to ordinary equity holders:
GBPm
Year ended
Year ended 31 December
31 December 2012
2013 Restated¹
Profit for the financial year attributable to equity holders of the parent from continuing operations 702 608
Profit for the financial year attributable to equity holders of the parent from discontinued operations 3 564
Profit for the financial year attributable to equity holders of the parent 705 1,172
Dividends paid to holders of perpetual preferred callable securities, net of tax credits (37) (32)
Profit attributable to ordinary equity holders 668 1,140
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
Total dividends paid to holders of perpetual preferred callable securities of GBP37 million for the year ended 31 December 2013 (year ended 31
December 2012: GBP32 million) are stated net of tax credits of GBP10 million (year ended 31 December 2012: GBP10 million).
The table below summarises the calculation of the weighted average number of ordinary shares for the purposes of calculating basic earnings per
share:
Millions
Year ended Year ended
31 December 31 December
2013 2012
Weighted average number of ordinary shares in issue 4,897 5,096
Shares held in charitable foundations (6) (6)
Shares held in ESOP trusts (55) (61)
Adjusted weighted average number of ordinary shares 4,836 5,029
Shares held in life funds (155) (181)
Shares held in Black Economic Empowerment trusts (239) (261)
Weighted average number of ordinary shares used to calculate basic earnings per share 4,442 4,587
Basic earnings per ordinary share (pence)¹ 15.0 24.9
(1) Restatement for the impact of changes in policies did not result in changes to basic earnings per share for the year ended 31 December 2012.
(b) Diluted basic earnings per share
Diluted basic EPS recognises the dilutive impact of share options held in ESOP trusts and Black Economic Empowerment trusts, to the extent they
have value, in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full period.
The tables below reconcile the profit attributable to ordinary equity holders to diluted profit attributable to ordinary equity holders and summarises
the calculation of weighted average number of shares for the purpose of calculating diluted basic earnings per share:
Year ended
Year ended 31 December
31 December 2012
Notes 2013 Restated¹
Profit attributable to ordinary equity holders (GBPm) 668 1,140
Dilution effect on profit relating to share options issued by subsidiaries (GBPm) (10) (10)
Diluted profit attributable to ordinary equity holders (GBPm) 658 1,130
Weighted average number of ordinary shares (millions) C2(a) 4,442 4,587
Adjustments for share options held by ESOP trusts (millions) 45 53
Adjustments for shares held in Black Economic Empowerment trusts (millions) 239 261
Weighted average number of ordinary shares used to calculate diluted basic
earnings per share (millions) 4,726 4,901
Diluted basic earnings per ordinary share (pence)(2) 13.9 23.1
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
(2) Restatement for the impact of changes in policies did not result in changes to diluted basic earnings per share for the year ended 31 December 2012.
(c) Adjusted operating earnings per share
The following table presents a reconciliation of profit for the financial year to adjusted operating profit after tax attributable to ordinary equity holders
and summarises the calculation of adjusted operating earnings per share:
Year ended
Year ended 31 December
31 December 2012
Notes 2013 Restated(1)
Profit for the financial year attributable to equity holders of the parent (GBPm) 705 1,172
Adjusting items (GBPm) 286 467
Tax on adjusting items (GBPm) (46) (44)
Non-core operations (GBPm) (32) (165)
Profit from discontinued operations (GBPm) (3) (564)
Non-controlling interest on adjusting items (GBPm) (20) (25)
Adjusted operating profit after tax attributable to ordinary equity holders (GBPm) 890 841
Adjusted weighted average number of ordinary shares used to calculate adjusted
operating earnings per share (millions)(2) C2(a) 4,836 4,818
Adjusted operating earnings per share (pence) 18.4 17.5
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
(2) For the year ended 31 December 2012, the weighted average number of shares used in the calculation of basic and diluted basic EPS was adjusted for the seven-for-
eight share consolidation that was affected on 23 April 2012. For adjusted operating EPS, the adjustment of the weighted average number of shares has been made
effective from 1 January 2012. This adjustment had the effect of presenting adjusted EPS on a more consistent basis, but resulted in a difference between the
adjusted weighted average number of shares for IFRS and AOP.
(d) Headline earnings per share
The Group is required to calculate headline earnings per share (HEPS) in accordance with the JSE Limited (JSE) Listing Requirements, determined
by reference to the South African Institute of Chartered Accountants' circular 02/2013 (Revised) 'Headline Earnings'. The table below sets out a
reconciliation of basic EPS and HEPS in accordance with that circular. Disclosure of HEPS is not a requirement of IFRS, but it is a commonly used
measure of earnings in South Africa.
The table below reconciles the profit for the financial year attributable to equity holders of the parent to headline earnings and summarises
the calculation of basic and diluted HEPS:
GBPm
Year ended
Year ended 31 December 2012
31 December 2013 Restated(1)
Notes Gross Net Gross Net
Profit for the financial year attributable to equity holders of the parent 705 705 1,172 1,172
Dividends paid to holders of perpetual preferred callable securities (37) (37) (32) (32)
Profit attributable to ordinary equity holders 668 668 1,140 1,140
Adjustments:
Impairments of goodwill and intangible assets 28 28 35 35
Loss/(profit) on disposal of subsidiaries, associated undertakings
and strategic investments 4 (12) (183) (173)
Realised gains (net of impairments) on available-for-sale financial assets (8) (8) (21) (21)
Exchange differences realised on disposal - - (350) (350)
Headline earnings 692 676 621 631
Weighted average number of ordinary shares C2(a) 4,442 4,442 4,587 4,587
Diluted weighted average number of ordinary shares C2(b) 4,726 4,726 4,901 4,901
Headline earnings per share (pence) 15.6 15.2 13.5 13.8
Diluted headline earnings per share (pence) 14.6 14.3 12.7 12.9
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details. Impairment of intangible assets is now excluded
from the determination of HEPS.
C3: Dividends
GBPm
Year
Year ended ended
31 December 31 December
2013 2012
2011 Final dividend paid - 3.5p per 10p share - 178
Special dividend - 18.0p per 10p share - 915
2012 Interim dividend paid – 1.75p per 11 3/7p share - 79
2012 Final dividend paid – 5.25p per 11 3/7p share 238 -
2013 Interim dividend paid – 2.10p per 11 3/7p share 98 -
Dividends to ordinary equity holders 336 1,172
Dividends paid to holders of perpetual preferred callable securities 47 42
Dividend payments for the period 383 1,214
Final and interim dividends paid to ordinary equity holders are calculated using the number of shares in issue at the record date less own shares
held in ESOP trusts, life funds of Group entities, Black Economic Empowerment trusts and related undertakings.
As a consequence of the exchange control arrangements in place in certain African territories, dividends to ordinary equity holders on the branch
registers of those countries (or, in the case of Namibia, the Namibian section of the principal register) are settled through Dividend Access Trusts
established for that purpose.
A final dividend of 6.0 pence (or its equivalent in other applicable currencies) per ordinary share in the Company has been recommended by the
directors. The final dividend will be paid on 30 May 2014 to shareholders on the register at the close of business on 14 April 2014 for the Malawi
register, 16 April 2014 for the South African, Zimbabwe and Namibian registers and 22 April 2014 for the UK register. The dividend will absorb an
estimated GBP275 million of shareholders' funds. The Company is not planning to offer a scrip dividend alternative.
In March and November 2013, GBP22 million and GBP25 million respectively, were declared and paid to holders of perpetual preferred callable
securities (March 2012: GBP22 million, November 2012: GBP20 million).
D: Other income statement notes
D1: Income tax expense
(a) Analysis of total income tax expense
GBPm
Year ended
Year ended 31 December
31 December 2012
2013 Restated(1)
Current tax
United Kingdom (3) 18
Overseas tax
- Africa 407 501
- Europe 19 30
- Rest of the world 7 16
Withholding taxes (STC) 16 23
Adjustment to current tax in respect of prior years (25) 5
Total current tax 421 593
Deferred tax
Origination and reversal of temporary differences 142 (122)
Effect on deferred tax of changes in tax rates (15) 2
Recognition of deferred tax assets 1 (2)
Adjustments to deferred tax in respect of prior years 3 -
Total deferred tax 131 (122)
Total income tax expense 552 471
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
(b) Reconciliation of total income tax expense
GBPm
Year ended
Year ended 31 December
31 December 2012
2013 Restated(1)
Profit before tax 1,532 1,385
Tax at UK standard rate of 23.25% (2012: 24.5%) 356 339
Different tax rate or basis on overseas operations 57 19
Untaxed and low taxed income (76) (83)
Disallowable expenses 35 48
Net movement on deferred tax assets not recognised 31 48
Effect on deferred tax of changes in tax rates (15) 2
Withholding taxes (STC) 10 20
Income tax attributable to policyholder returns 133 59
Tax on Group equity held in life funds 21 26
Other - (7)
Total income tax expense 552 471
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
(c) Income tax relating to components of other comprehensive income
GBPm
Year ended
Year ended 31 December
31 December 2012
2013 Restated(1)
Preferred perpetual callable securities (10) (10)
Measurement gains on defined benefit plans 22 4
Income tax on items that will not be reclassified subsequently to profit or loss 12 (6)
Income tax on items that may be reclassified subsequently to profit or loss (2) 5
Income tax expense/(credit) – continuing operations 10 (1)
Income tax expense on fair value movements – discontinued operations - 1
Income tax expense relating to components of other comprehensive income 10 -
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
(d) Reconciliation of income tax expense in the IFRS income statement to income tax on adjusted operating profit
Year ended
Year ended 31 December
31 December 2012
2013 Restated(1)
Income tax expense 552 471
Tax on adjusting items
Goodwill impairment and impact of acquisition accounting 26 51
Profit/(loss) on disposal of subsidiaries, associates and strategic investments 16 (10)
Short-term fluctuations in investment return (2) 7
Tax on dividends declared to holders of perpetual preferred callable securities recognised in equity (10) (10)
US Asset Management equity plans 11 6
Restructuring costs 5 -
Total tax on adjusting items 46 44
Income tax attributable to policyholders returns (174) (75)
Income tax on adjusted operating profit 424 440
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
E: Financial assets and liabilities
E1: Borrowed funds
GBPm
At At
Group 31 December Group 31 December
excluding 2013 excluding 2012
Notes Nedbank Nedbank Group Nedbank Nedbank Group
Senior debt securities and term loans 113 1,151 1,264 122 1,363 1,485
Floating rate notes E1(a) - 673 673 - 849 849
Fixed rate notes E1(b) 113 478 591 122 514 636
Mortgage-backed securities E1(d) - 65 65 - 131 131
Subordinated debt securities (net of
Group holdings) E1(e) 703 597 1,300 765 669 1,434
Borrowed funds 816 1,813 2,629 887 2,163 3,050
Other instruments treated as equity
for accounting purposes
EUR374 million perpetual preferred(1)
callable securities 253 334
GBP273 million perpetual preferred(2)
callable securities 273 348
Total: Book value 1,342 1,569
Nominal value of the above 1,370 1,590
(1) The EUR374 million perpetual callable security was previously EUR495 million with EUR121 million being acquired via a Modified Dutch Auction tender on 19 November 2013.
(2) The GBP273 million perpetual callable security was previously GBP348 million with GBP75 million being acquired via a Modified Dutch Auction tender on 19
November 2013.
The table below is a maturity analysis of the liability cash flows based on contractual maturity dates for borrowed funds. Maturity analysis is
undiscounted and based on year-end exchange rates.
GBPm
At At
Group 31 December Group 31 December
excluding 2013 excluding 2012
Nedbank Nedbank Group Nedbank Nedbank Group
Less than 1 year 98 385 483 110 522 632
Greater than 1 year and less than 5 years 751 1,727 2,478 907 1,820 2,727
Greater than 5 years 1,099 236 1,335 1,311 314 1,625
Total 1,948 2,348 4,296 2,328 2,656 4,984
Contractual maturity tables include all the data available for both years as at 31 December 2013.
Senior debt securities and term loans
(a) Floating rate notes
GBPm
At At
31 December 31 December
Maturity date 2013 2012
Nedbank - Floating rate unsecured senior debt
R98 million at inflation linked (3.80% real yield) Repaid - 8
R1,750 million at inflation linked (3.90% real yield) Repaid - 151
R1,552 million at JIBAR + 1.48% Repaid - 114
R988 million at JIBAR + 1.05% March 2014 50 71
R500 million at JIBAR + 1.00% April 2014 26 33
R1,075 million at JIBAR + 0.94% October 2014 62 79
R1,297 million at JIBAR + 1.00% February 2015 75 95
R1,027 million at JIBAR + 1.75% April 2015 60 76
R250 million at JIBAR + 1.00% August 2015 14 18
R1,044 million at JIBAR + 2.20% September 2015 61 76
R677 million at JIBAR + 1.25% March 2016 39 49
R3,056 million at JIBAR + 0.8% July 2016 176 -
R694 million at JIBAR + 0.75% November 2016 40 -
R405 million at JIBAR + 1.30% February 2017 23 30
R786 million at JIBAR + 1.30% August 2017 42 43
R80 million at JIBAR + 2.15% April 2020 5 6
Total floating rate notes 673 849
All floating rate notes are non-qualifying for the purposes of regulatory tiers of capital.
(b) Fixed rate notes
GBPm
At At
31 December 31 December
Maturity date 2013 2012
Nedbank - Fixed rate unsecured senior debt (net of Group holdings)
R450 million at 8.39% March 2014 26 33
R478 million at 9.68% April 2015 28 35
R3,244 million at 10.55% September 2015 192 242
R1,137 million at 9.36% March 2016 67 85
R151 million at 6.91% July 2016 9 -
R1,273 million at 11.39% September 2019 80 102
R1,888 million at 8.92% November 2020 109 -
R660 million at zero coupon October 2024 14 17
525 514
Less: fixed rate notes held by other Group companies (47) -
Banking fixed rate unsecured senior debt (net of Group holdings) 478 514
Group excluding Nedbank
US$2 million secured senior debt at 5.23%(1) August 2014 1 10
GBP112 million eurobond at 7.125% October 2016 112 112
113 122
Total fixed rate notes 591 636
All fixed rate notes are non-qualifying for the purpose of regulatory tiers of capital.
(1) $14 million of the $16 million senior bond was repaid, with repayment of $12 million on 1 November 2013 and $2 million on 15 December 2013.
(c) Revolving credit facilities and irrevocable letters of credit
Following an internal review of Group funding requirements, the Group reduced its revolving credit facility by GBP400 million in August 2013. The
Group now has access to a GBP800 million (2012: GBP1,200 million) five-year multi-currency revolving credit facility which matures in April 2016.
At 31 December 2013 and 31 December 2012, none of this facility was drawn down and there were no irrevocable letters of credit in issue against
this facility.
(d) Mortgage-backed securities (net of Group holdings)
GBPm
At At
31 December 31 December
Tier Maturity date 2013 2012
Nedbank
R480 million (class A1) at JIBAR + 1.10% Tier 2 25 October 2039 13 32
R336 million (class A2) at JIBAR + 1.25% Tier 2 25 October 2039 20 25
R900 million (class A3) at JIBAR + 1.54% Tier 2 25 October 2039 52 66
R110 million (class B) at JIBAR + 1.90% Tier 2 25 October 2039 6 8
91 131
Less: Mortgage backed securities held by other Group companies (26) -
Total mortgage-backed securities 65 131
(e) Subordinated debt securities (net of Group holdings)
GBPm
At At
First call Maturity 31December 31December
Tier date date 2013 2012
Nedbank
R300 million at JIBAR + 2.50% Tier 2 Repaid Repaid - 11
R1,800 million at 9.84% Tier 2 Repaid Repaid - 137
R1,265 million at JIBAR + 4.75% Non-core Tier 1 November 2018 November 2018 74 93
R487 million at 15.05% Non-core Tier 1 November 2018 November 2018 32 43
R1,700 million at 8.90% Tier 2 February 2014 February 2019 101 132
R1,000 million at 10.54% Tier 2 September 2015 September 2020 62 81
US$100 million at 3 month USD LIBOR Tier 2 Secondary March 2017 March 2022 60 62
R2,000 million at JIBAR + 0.47% Tier 2 July 2017 July 2022 116 146
R1,800 million at JIBAR + 2.75% Tier 2 July 2018 July 2023 105 -
R1,200 million at JIBAR + 2.55% Tier 2 November 2018 November 2023 69 -
619 705
Less: Banking subordinated debt securities
held by other Group companies (22) (36)
Banking subordinated securities
(net of Group holdings) 597 669
Group excluding Nedbank
R3,000 million at 8.92% until October 2015
and 3 month JIBAR + 1.59% thereafter Lower Tier 2 October 2015 October 2020 172 218
GBP500 million at 8.00%1 Lower Tier 2 - June 2021 531 547
703 765
Total subordinated debt securities 1,300 1,434
(1) The principal and coupon on the bond were initially swapped into floating rate Swedish kronor, at 3 month STIBOR plus 5.46%. Following the Nordic sale, GBP375
million of the coupon is now swapped into floating rate sterling at 6 month GBP LIBOR plus 4.15% and GBP125 million of principal and coupon is swapped into US
dollars at 6 month USD LIBOR plus 5.49%.
F: Other statement of financial position notes
F1: Non-controlling interests
(a) Profit or loss
(i) Ordinary shares
The non-controlling interests share of profit for the financial year has been calculated on the basis of the Group's effective ownership of the
subsidiaries in which it does not own 100% of the ordinary equity. The principal subsidiaries where a non-controlling interest exists is the Group's
banking business in South Africa, Nedbank. For the year ended 31 December 2013 the non-controlling interests attributable to ordinary shares was
GBP259 million (2012: GBP256 million).
(ii) Preferred securities
GBPm
At At
31 December 31 December
2013 2012
Nedbank
R3,583 million non-cumulative preference shares 19 23
Group excluding Nedbank
US$750 million cumulative preferred securities(1) - 27
Non-controlling interests – preferred securities 19 50
(1) On 24 September 2012, the Group repaid the US$750 million cumulative preference securities at their nominal value.
(iii) Non-controlling interests - adjusted operating profit
The following table reconciles non-controlling interests' share of profit for the financial year to non-controlling interests' share of adjusted
operating profit:
GBPm
Year ended
Year ended 31 December
31 December 2012
Reconciliation of non-controlling interests' share of profit for the financial year 2013 Restated(1)
The non-controlling interests share is analysed as follows:
Non-controlling interests – ordinary shares 259 256
Income attributable to Black Economic Empowerment trusts 20 25
Non-controlling interests share of adjusted operating profit 279 281
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
The Group uses revised weighted average effective ownership interests when calculating the non-controllable interest applicable to the adjusted
operating profit of its Southern African businesses. This reflects the legal ownership of these businesses following the implementation for Black Economic
Empowerment (BEE) schemes in 2005. In accordance with IFRS accounting rules the shares issued for BEE purposes are deemed to be, in substance, options.
Therefore the effective ownership interest of the minorities reflected in arriving at profit after tax in the consolidated income statement is lower than
that applied in arriving at adjusted operating profit after tax. In 2013 the increase in adjusted operating profit attributable to non-controlling interests
as a result of this was GBP20 million (2012: GBP25 million).
(b) Statement of financial position
(i) Ordinary shares
GBPm
At
At 31 December
31 December 2012
Reconciliation of movements in non-controlling interests 2013 Restated(1)
Balance at beginning of the year 1,684 1,652
Non-controlling interests' share of profit 259 256
Non-controlling interests' share of dividends paid (117) (119)
Net disposal of interests 20 20
Foreign exchange and other movements (344) (125)
Balance at end of the year 1,502 1,684
(1) The prior year has been restated for the impact of changes in accounting policies. Refer to note I1 for further details.
(ii) Preferred securities
GBPm
At At
31 December 31 December
2013 2012
Nedbank
R3,583 million non-cumulative preference shares(1) 265 273
Total in issue at 31 December 265 273
Preferred securities at 31 December 2013 are held at historic value of consideration received less unamortised issue costs and are stated net of
securities held by Group companies
(1) 3,583 million R10 preference shares issued by Nedbank Limited (Nedbank), the Group's banking subsidiary. These shares are non-redeemable and non-cumulative
and pay a cash dividend equivalent to 75% of the prime overdraft interest rate of Nedbank. Preference shareholders are only entitled to vote during periods when a
dividend or any part of it remains unpaid after the due date for payment or when resolutions are proposed that directly affect any rights attaching to the shares or the
rights of the holders. Preference shareholders will be entitled to receive their dividends in priority to any payment of dividends made in respect of any other class of
Nedbank's shares.
G: Other notes
G1: Contingent liabilities
GBPm
At At
31 December 31 December
2013 2012
Guarantees and assets pledged as collateral security 2,052 2,521
Irrevocable letters of credit 184 177
Secured lending 304 492
Other contingent liabilities 30 57
The Group, through its South African banking business, has pledged debt securities amounting to GBP703 million (2012: GBP1,203 million) as
collateral for deposits received under re-purchase agreements. These amounts represent assets that have been transferred but do not qualify for
derecognition under IAS 39. These transactions are entered into under terms and conditions that are standard industry practice to securities
borrowing and lending activities.
Contingent liabilities – tax
The Revenue authorities in the principal jurisdictions in which the Group operates (South Africa and the United Kingdom) routinely review historic
transactions undertaken and tax law interpretations made by the Group. The financial statements accordingly include provisions that reflect the
Group's assessment of liabilities which might reasonably be expected to materialise.
Nedbank litigation
There are a number of legal or potential claims against Nedbank and its subsidiary companies, the outcome of which cannot at present be
foreseen. As previously disclosed, the largest of these potential actions are claims in the High Court against Nedbank by certain shareholders in
Pinnacle Point Group Ltd, alleging that Nedbank had a legal duty of care to them arising from a share swap transaction. In 2013 two of these
claims of R147 million and of R802 million were dismissed by the North Gauteng High Court. The only claim remaining is for R355 million.
Originally these shareholders and others lodged proceedings with the Securities Regulation Panel (SRP) for an order declaring that an affected
transaction took place. The SRP ruled that no affected transaction took place. The last remaining claimant brought an application to the South
Gauteng High Court for the review of the SRP ruling. This application was dismissed with costs on 15 November 2013. The applicant filed a notice
to apply for leave to appeal this judgment, which Nedbank will oppose.
During 2011 further actions were instituted against Nedbank Ltd by other stakeholders for R210 million, and by Absa Bank Limited for R773 million.
In both these actions Nedbank have filed exceptions against the claims.
Nedbank Ltd and its legal advisers remain of the opinion that the remaining claims are ambitious, and that the remaining claimants will have great
difficulty succeeding.
Consumer protection
Old Mutual is committed to supporting its customers in meeting their lifetime goals and treating customers fairly is central to how our businesses
operate. We routinely engage with customers and regulators to ensure that we meet this commitment, but there is the risk of regulatory intervention
across various jurisdictions, giving rise to the potential for customer redress which can result in retrospective changes to policyholder benefits,
penalties or fines. Where this occurs, the Group makes financial provision for the related costs.
G2: Businesses acquired during the year
The Group continued to expand operations in Africa and Latin America through the following completed acquisitions:
Consideration Shares
Acquiree Country Nature of business paid (GBPm) acquired Effective date
Oceanic Life Nigeria Life insurance 9 70% 20 December 2012
Business platform and distribution
Aiva Holdings Group S.A Uruguay business 22 86% 2 January 2013
Provident Life Assurance Company
Limited Ghana Life insurance 7 90% 12 September 2013
Oceanic General Nigeria General insurance 12 70% 26 November 2013
Goodwill of GBP30 million has been recognised on these acquisitions. Refer to note F1 in the Annual Report and Accounts for further analysis of
the goodwill recognised. Acquisition costs of GBP2 million are included in operating expenses and have been excluded from the Group's adjusted
operating profit. The net profit received from the above acquisitions has been consolidated for the 31 December 2013 financial year.
The table below sets out the consolidated assets and liabilities acquired as a result of these acquisitions:
GBPm
Acquirees'
carrying
amount
Assets
Investment property 13
Investments and securities 20
Cash and cash equivalents 17
Trade, other receivables and other assets 5
Total assets 55
Liabilities
Long-term business policyholder liabilities 18
Current tax payable 1
Trade, other payables and other liabilities 10
Total liabilities 29
Net assets acquired 26
Group's portion of net assets acquired 20
Consideration paid 50
Goodwill recognised 30
The carrying value of assets and liabilities in the entities statement of financial position on acquisition date approximates the fair value of these
items determined by the Group. The receivables recognised by the Group are included in other assets and represent their fair value due to their
short-term nature. No indemnification assets or contingent liabilities were recognised on acquisition of the above business. Contingent
consideration of GBP11 million is payable to the sellers of Aiva Holdings Group SA in 2016 and 2018 dependent on the achievement of pre-
determined performance indicators, an estimate which has been included in the purchase consideration.
G3: Events after the reporting date
On 28 February 2014, the Group announced the acquisition of Intrinsic Financial Services Limited, the third largest adviser network in the UK with
more than 3,000 advisers, both restricted and independent. This will enable the Old Mutual Wealth business to provide advice to UK retail
customers. The purchase of Intrinsic Financial Services Limited is a critical part of the Old Mutual Wealth strategy to create a leading wealth
management business that combines financial advice, investment solutions and high quality asset management to deliver first class outcomes for
our customers.
On 28 February 2014, the Group announced that during 2014 it intends to proceed with an Initial Public Offering of a minority stake in its US Asset
Management Business (USAM), subject to market conditions. The offering will enhance USAM's financial and operating flexibility to deploy capital
to continue to grow and further develop the business. This transaction will require a registration statement to be filed with the U.S. Securities and
Exchange Commission. The registration statement will include additional information. The announcement was made pursuant to and in accordance with
Rule 135 under the U.S. Securities Act (1933). This disclosure does not constitute an offer to sell or the solicitation of an offer to buy securities,
and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of that jurisdiction.
In line with Nedbank's scheduled capital plans, there was a full capital redemption of NED8, the R1.7 billion unsecured subordinated note that
qualified as Tier 2 capital under Basel II, with effect from 8 February 2014. This event is not an adjusting post balance sheet event.
H: Discontinued operations and disposal groups held for sale
H1: Discontinued operations
Discontinued operations relate to the results of the Group's Swedish, Danish and Norwegian life businesses, collectively Nordic. The disposal of
Nordic was completed on 21 March 2012 following shareholder and regulatory approval and was reported up until that date. The Group continues to
incur costs that are directly related to the sale of Nordic. These costs relate to the transition of IT and other services, previously provided by Nordic
to the wider Group, back to the Group. These costs are included in the expenses related to the discontinued operations. The profit on disposal of
discontinued operations for the year ending 31 December 2013 was recognised following the finalisation of the transfer of Old Mutual Guodian Life
Assurance Company Ltd, the Group's Chinese joint venture, from Nordic to Old Mutual Life Assurance Company (South Africa) Limited. This
transaction was included in the Nordic sale agreement and was subject to regulatory approval which was obtained in June 2013.
(a) Income statement from discontinued operations (Nordic)
GBPm
Year ended Year ended
31 December 31 December
2013 2012
Revenue - 842
Expenses (26) (866)
Loss before tax from discontinued operations - trading activities (26) (24)
Profit on disposal 27 239
Realised available-for-sale investment gains and exchange differences on disposal - 350
Profit before tax from discontinued operations 1 565
Income tax credit/(charge) 2 (1)
Profit after tax from discontinued operations 3 564
(b) Statement of comprehensive income from discontinued operations (Nordic)
GBPm
Year ended Year ended
31 December 31 December
2013 2012
Profit from discontinued operations after tax 3 564
Other comprehensive income for the financial year
Fair value gains - 4
Exchange differences realised on disposal - (350)
Currency translation differences/exchange
differences on translating foreign operations - 2
Other movements - (3)
Aggregate tax on transfers from equity - (1)
Total other comprehensive loss from discontinued operations - (348)
Total comprehensive income for the financial year from discontinued operations 3 216
Attributable to
Equity holders of the parent 3 216
(c) Net cash flows from discontinued operations (Nordic)
GBPm
Year ended Year ended
31 December 31 December
2013 2012
Operating activities - (8)
Investing activities - (121)
Net cash flows from discontinued operations - (129)
H2: Contingent liabilities in respect of the disposal of US Life
Following its disposal in April 2011 of US Life to the Harbinger group (Harbinger), the Group has retained certain residual commitments and
contingent liabilities relating to that business. These arise from sale warranties and indemnities that are typical in transactions of this nature,
including in respect of certain litigation (including class actions) and regulatory enforcement actions arising from events that occurred before
completion of the sale. The residual commitments are in effect for varying periods of time.
The sale agreement contemplated that Harbinger would establish certain internal reinsurance arrangements after completion, which were subject to
regulatory approval. If such regulatory approval was not forthcoming, there was potential for a reduction in the purchase price of US Life of up to a
maximum of US$50 million. In July 2012, Harbinger filed a lawsuit against the Group, claiming payment of a purchase price adjustment of US$50
million. The Group has filed its defence and is vigorously defending this claim. In view of the ongoing uncertainty and the Group's current
assessment of this claim, the Group has not raised a provision against this exposure.
I: Changes in accounting policies
I1: Accounting policies adopted for the year ended 31 December 2013
Several new accounting standards are applicable to the Group for the year ended 31 December 2013, with restatement of the comparative
information for the year ended 31 December 2012 as required and restatement of the opening statement of financial position as at 1 January 2012.
The standards that were relevant and have required restatement include IAS 1 'Presentation of Financial Statements', IAS 19 (Revised 2011)
'Employee Benefits', IFRS 10 'Consolidated Financial Statements' and IFRS 11 'Joint Arrangements'.
Three other standards and amendments have also been applied for the first time in 2013 but these are disclosure standards and have not required
a restatement of the statement of financial position. These include IFRS 7 'Financial Instruments: Disclosures (Amended 2011), IFRS 12 'Disclosure
of Interest in Other Entities' and IFRS 13 'Fair Value Measurement' and IAS 36 (Amended) 'Impairment of Assets'. Refer to note A5 in the Annual
Report and Accounts for further information.
IFRS 11 'Joint Arrangements' replaces IAS 31 'Interests in Joint Ventures' and SIC-13 'Jointly Controlled Entities' and removes the option to
account for joint arrangements using proportionate consolidation. Jointly controlled entities that meet the definition of a joint arrangement under
IFRS 11 'Joint Arrangements' must now be accounted for using the equity method. This did not have a material impact on the Group's statement of
financial position.
The following standards adopted by the Group had an impact on the financial statements:
Amendments to IAS 1 'Presentation of Items of Other Comprehensive Income'
The amendments to IAS 1 'Presentation of Items of Other Comprehensive Income' require that an entity present separately the items of other
comprehensive income (OCI) that may be reclassified to profit or loss in the future, from those that will never be reclassified to profit or loss. The
amendment affected presentation only and had no impact on the shareholders' equity or profit.
IAS 19 'Employee Benefits' (Revised 2011)
The Group has adopted IAS 19 'Employee Benefits' (Revised 2011) with a date of initial application of 1 January 2013.
The key amendments are:
- The corridor method has been removed and all actuarial gains and losses are required to be recognised in OCI rather than in profit or loss.
Expected returns on plan assets are no longer recognised in profit or loss. Instead, interest is recognised on the net defined benefit liability or
asset in profit or loss, calculated using the discount rate used to measure the defined benefit obligation.
- Past service costs arising from plan amendments or curtailment are now recognised in profit or loss at the earlier of when the amendment
occurs or when the related restructuring or termination cost are recognised. The option to amortise such cost over future years has also been
eliminated.
- Administration costs, other than costs of managing plan assets, are recognised in the profit and loss when the service is provided.
The change in accounting policy has been applied retrospectively and as a result, the comparative information for the year ended 31 December
2012 has been restated accordingly.
The major impact of the adoption of the standard was an increase in operating and administrative expenses and a net increase in OCI. The overall
impact on the Group was a decrease in equity, an increase in the assets and an increase in the liabilities of the Group. The standard affects the
accounting for certain defined pension schemes in Emerging Markets, Nedbank and Old Mutual plc.
The transitional adjustment, applied to the opening statement of financial position as at 1 January 2013, had an effect of decreasing equity by
GBP17 million, increasing total assets by GBP81 million and increasing total liabilities by GBP98 million.
IFRS 10 'Consolidated Financial Statements'
The Group has early adopted IFRS 10 'Consolidated Financial Statements' with a date of initial application of 1 January 2013.
IFRS 10 'Consolidated Financial Statements' introduces a single control model that applies to all entities, including special purpose entities. IFRS
10 'Consolidated Financial Statements' replaces the parts of IAS 27 'Consolidated and Separate Financial Statements' that dealt with consolidated
financial statements and SIC-12 'Consolidation – Special Purpose Entities'. IFRS 10 'Consolidated Financial Statements' changes the definition of
control such that an investor controls an investee when it has power over the investee, when it is exposed, or has rights, to variable returns from its
involvement with the investee and when it has the ability to use its power over the investee to affect those returns. To meet the definition of control
in IFRS 10 'Consolidated Financial Statements', all three of these criteria must be met.
The implementation of this standard did not have a significant financial impact on the Group's assessment of its interests in investment funds, but it
did increase the number of investment funds consolidated. The principal effect was a gross up of the consolidated statement of financial position for
the difference between the value of the newly consolidated assets and liabilities and the carrying value of the Group's interest, and the equal and
opposite liability for the interests of external parties in these investment funds.
The transitional adjustment, applied to the opening statement of financial position as at 1 January 2013, had an effect of decreasing non-controlling
interest by GBP8 million, increasing total assets by GBP3,384 million and increasing total liabilities by GBP3,392 million.
The Group has only considered the consolidation suite of standards for interests that existed at 1 January 2013. The change in accounting policy
has been applied retrospectively and as a result, the comparative information for the year ended 31 December 2012 and the opening position at 1
January 2012 have been restated accordingly.
Effect of the adoption of IAS 19 (Revised) and IFRS 10 'Consolidated Financial Statements'
The following tables summarise the impact of the restatements in the financial statements:
GBPm
Adjustments Adjustments
As previously for adoption for adoption
Year ended 31 December 2012 reported of IAS 19 of IFRS 10 As restated
Consolidated income statement
Profit after tax from continuing operations 923 (1) (8) 914
Profit after tax for the financial year 1,487 (1) (8) 1,478
Non-controlling interests 314 - (8) 306
Consolidated statement of comprehensive income
Total other comprehensive income for the financial year1 (811) 4 - (807)
Total comprehensive income for the financial year1 676 3 (8) 671
Reconciliation of adjusted operating profit to profit after tax
Adjusting items (459) - (8) (467)
Adjusted operating profit after tax attributable to equity holders of the
parent 842 (1) - 841
Consolidated statement of financial position
Total assets 143,497 81 3,384 146,962
Total liabilities 133,699 98 3,392 137,189
Equity attributable to ordinary shareholders of the parent 7,833 (17) - 7,816
Non-controlling interests 1,965 - (8) 1,957
(1) The comparative information has been restated to reflect the fact that all movements on the share-based payment reserve are reflected directly in equity and no longer
in other comprehensive income.
GBPm
Adjustments Adjustments
As previously for adoption for adoption
At 1 January 2012 reported of IAS 19 of IFRS 10 As restated
Consolidated statement of financial position
Total assets 162,385 (12) 2,798 165,171
Total liabilities 151,527 8 2,798 154,333
Equity attributable to ordinary shareholders of the parent 8,488 (20) - 8,468
Sponsor
Merrill Lynch South Africa (Pty) Ltd
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